Compensation-Concept, Methods, Principles and Practice

Sanjay Upadhyay
Advocate
Supreme Court of India

For the Government of Himachal Pradesh

Prepared by Environics Trust for NLTA
 TABLE OF CONTENT

Chapter I- Introduction – Concepts, methods and principles ........................ 4

1.1. Compensation: A pivotal cause of concern in Land Acquisition: ........... 4
1.2. Who are persons interested to claim an interest in compensation in LAA?
............................................................................................. 4
1.3 Damage versus Compensation: Legal Framework on Compensation ........ 5
1.4. Compensation: Principles and Bases: ........................................... 6
1.4.1 Factors to be taken into account in assessment .......................... 7
1.4.2 Compensation: Land for Land- Cannot be a mandatory condition ..... 7
1.4.3. Determination of compensation ............................................ 8
1.4.4. Alternative employment and Minimum wages: .......................... 8
1.5. Matters to be considered in determining compensation..................... 9
1.5.1 Determination of Market Value: ............................................. 9
1.5.2. Burden of Proof: On Claimants? Not always .............................. 9
1.5.3. Principle of Prudent purchaser: .......................................... 10
1.5.4. Reasonable market value: Guess Work Possible ....................... 10
1.5.5. Future Potential Value of Land: Distinguishing Potentiality and
Realizable Potentiality ............................................................. 10
1.5.6. Factors in determining Market Value: ................................... 10
1.5.7. Evaluation of factors: ...................................................... 12
1.5.8. Well-recognized principles of valuation of Market Value: ........... 12
a) Comparative Sales Method .................................................. 12
b) Other Methods of valuation of Market value: ............................ 13
c) Methods of capitalization of the net income as an alternative method:
...................................................................................... 13
d) Willing Purchaser and Willing Buyer: ...................................... 13
e) Principle of Deduction ....................................................... 14
1.5.9. Determination of compensation, past transaction not the only
criterion .............................................................................. 14
1.5.10. Interest on solatium ...................................................... 14
1.5.11. The Practice of “Safe Market Value”: ................................. 15
1.6 Matters to be neglected in determining compensation ..................... 15
Chapter II- Current Approaches, Methods and Role of Court in Himachal Pradesh
on Compensation ......................................................................... 17
2.1. What actually happens is a matter of enquiry: ............................. 17
2.2. Land Administrative Manual and Standing Orders 28: The Guide Books to
be adhered ............................................................................. 17
2.2.1. Preliminary Estimate of Cost ............................................. 17
2.2.2. Market value of land ....................................................... 18
2.2.3. Consequential damages ................................................... 18
2.2.4. Damage to other land of right holder: Special Instructions from
Railways and Irrigation............................................................. 18
2.3. Matters to be excluded from consideration in estimating market value 19
2.4. Compensation other than in money : Land for Land-Conditions ......... 19

Compensation-methods, principles and practice 2

 2.5. Apportionment of compensation .............................................. 20
2.6. Compensation to assignees: .................................................... 20
2.7. Compensation for damage done during occupation ....................... 20
2.8. Compensation and State of Himachal Pradesh: Some specific sectoral
concerns ................................................................................ 21
2.8.1. Acquisition of land with fruit trees: Both are essential in
determining compensation ........................................................ 21
2.8.2. Road Sector: acquisition of land of different classification:
Conflicting Views ................................................................... 21
2.8.3. Road Sector: Additional compensation from date of notification or
date of possession: Conflicting views............................................ 22
2.9. Grazing Rights and entitlement to Compensation .......................... 23
2.10. Development Cost and Development Charges: ............................ 23
Chapter III- Allied Laws related to Land Acquisition and compensation in
Himachal Pradesh ........................................................................ 24
3.1. Himachal Pradesh Roadside Land Control Act: .............................. 24
3.2. Procedure to determine the amount of compensation .................... 24
3.3. Tenancy and Land Reforms Act: Procedure for acquisition and
computation of compensation ....................................................... 25
3.4. Himachal Pradesh Ancient and Historical Monuments and Archaeological
Sites and Remains Act, 1976: Compensation under the Act .................... 26
3.5. The Himachal Pradesh Slum Areas (Improvement and Clearance) Act,
1979: Determination of Compensation under the Act ........................... 26
3.6. Dispute Resolution on compensation, apportionment ..................... 26
Concluding Remarks: .................................................................... 27

Compensation-methods, principles and practice 3

 Compensation-Concept, methods, principles and practice

Sanjay Upadhyay1

Chapter I- Introduction – Concepts, methods and principles

1.1. Compensation: A pivotal cause of concern in Land Acquisition:

Compensation is the central concern of land acquisition authorities, project

proponents and most importantly the affected persons. It is important to
understand what compensation is in its entirety within the framework of the
Land Acquisition Act. Although, the word compensation has not been defined in
the Land Acquisition Act, the word figures in a number of provisions. Thus for
example a “person interested” includes all persons claiming an interest in
compensation to be made on account of acquisition of land under the Land
Acquisition Act.

1.2. Who are persons interested to claim an interest in compensation in

LAA?

In the LAA the person interested in land2 means any person (emphasis
supplied) claiming an interest in compensation on account of acquisition of
land. The Act is silent as to who are the persons who have an interest in the
compensation and therefore can claim the same. It, however, categorically
mentions that a person is to be considered interested in land if he is
interested in an easement affecting the land. Further, as per the notice
which is required by the Collector to be served upon all the interested
persons after the declaration of the intention of acquisition of land is
published, it includes occupiers of the land and all such persons either known
or believed to be interested in such land.3

In another provision of the LAA the Collector may require all such persons who
claim to have any interest in land to make a statement containing the names
of persons who have interest in the land in the capacity of a co-proprietor,
sub-proprietor, mortgagee, tenant or otherwise and the nature of such
interest and of the rents and profits if any received or receivable on account

1
Due acknowledgment to Ms Archana Vaidya, an independent legal consultant for assisting in this
Technical Note
2
Section 3(b) of LAA
3
Section 9(3) of LAA

Compensation-methods, principles and practice 4

of such above mentioned interest.4 Therefore by implication again the above
mentioned categories of people are also included in the list of interested
persons.

The Collector is also required to make an enquiry as to the true area of the
land being acquired, the amount of compensation payable in his opinion for
such land and the apportionment of the compensation among all the persons
known or believed to be interested in land of whom, or of whose claims he
has information whether or not they have appeared before him5. It means
that even if an interested person doesn’t appear before the Collector but he
has reasons to believe that such person has an interest in land, the same shall
be recognized in his award.

Further, particulars of the apportionment are to be specifically mentioned in

the award made by the Collector if all the persons interested have agreed to
such division. But if the amount of compensation is settled and there is a
dispute as to the persons to whom it is payable or the proportion of share of
the persons interested then such dispute shall be referred to the court by the
Collector.6 Therefore the Collector is competent to decide who are the
persons interested in compensation but any dispute in this regard shall have
to be referred to the court.

After a careful reading of the LAA the following emerge as the persons who
are interested in land.

Persons Interested:
• Proprietor, co-proprietor and sub-proprietor
• Occupier of land
• A person having a right of easement in the land.
• Mortgagee
• Tenant
• Any person either known or believed to be interested in such land.

It is thus clear that any compensation envisaged under the Act has to take
into account the above persons who are interested in the land.

1.3 Damage versus Compensation: Legal Framework on Compensation

Broadly, two kinds of compensation are envisaged under the Land Acquisition
Act. The first is more in the nature of payment of damages while preliminary
survey or setting out boundaries, cutting of trenching etc. are being carried out
after the preliminary notification for land acquisition. Here too the affected

4
Section 10(1) of LAA
5
Section 11(1) of LAA
6
See section 29 and 30 of LAA

Compensation-methods, principles and practice 5

person has a redressal mechanism in place regarding the sufficiency of the
amount paid while performing the above acts.

The second type of compensation is perhaps more important which starts with
the award7.

The Act, among other things, provides for the time line8 for such award and its
finality9 and the manner in which such value of land that is proposed to be
acquired has been arrived at. It also includes the redressal mechanism by way
of reference to court by any person who has not accepted the award10, the
obligation of the Collector towards the court11. The two most important
provisions for arriving at compensation are listed in Sections 23 and 24 where
the matters that are to be considered in determining compensation12 and
matters that are to be neglected in determining compensation13 are listed out.

It is also stated clearly that the amount of compensation awarded by court

shall not be lower than the amount awarded by the Collector14. Further, the
Act also lays down the form of awards15, costs16 and interest on excess
compensation17 as well as re-determination of the amount of compensation on
the basis of the award of the Court18. The Act also lays down the
apportionment of compensation19 and finally the payment of such
compensation20. Last but not the least the Act also provides safeguards where
even if acquisition is not complete, compensation is compulsory21. Let us now
understand the most important and substantive provisions on compensation
including how it has been interpreted by the judiciary at the highest level.

1.4. Compensation: Principles and Bases:

At the outset it is important to understand some of the principles that have

emerged on compensation. Foremost is the cardinal principle - “What one
takes must be paid for is the basis on which the initiation of the law of
acquisition commenced”. It is also well known that every person who is
affected by acquisition makes an attempt to enhance the value of
7
Section 11 of LAA
8
Section 11A ibid
9
Section 12 ibid
10
Section 18 ibid
11
Section 19 ibid
12
Section 23 ibid
13
Section 24 ibid
14
Section 25 ibid
15
Section 26 ibid
16
Section 27 ibd
17
Section 28 ibid
18
Section 28 A ibid
19
See part V especially Section 29, 30 ibid
20
Section 31 ibid
21
Section 48 of LAA

Compensation-methods, principles and practice 6

compensation that is paid to him/her. It is almost a given rule that invariably,
affected persons approach the Court to re-determine the principles of arriving
at the compensation value. It would be thus useful to understand the principles
on compensation, which is mandated by both legislation as well as judicial
interpretation.

1.4.1 Factors to be taken into account in assessment

There are certain factors that ought to be taken into account for assessment of
compensation. These include, among others,
• nature of land,
• its present use and capacity for a higher potential,
• its precise location in relation to adjoining land and
• the use to which neighboring land has been put and the impact of such
use on the land acquired 22

1.4.2 Compensation: Land for Land- Cannot be a mandatory condition

Under the framework of the Act, in the past the Supreme Court had overruled
the contention of livelihood needs on compulsory acquisition of land on the
ground that the Act provides for payment of solatium and other monetary
payments for deprivation of the land. The fact that for most marginal
communities, monetary compensation for loss of land can never be a
sustainable source of dignified living is often missed by the Courts. In recent
cases before the Supreme Court the argument that new piece of alternative
land of equal quality should be given to those dispossessed from land due to
acquisition for public purpose, has been asserted. The general response has
been that though the State is not obliged to provide alternative site, yet if the
State comes forward with a proposal to provide alternative sites, certainly the
Court gives effect to that proposal. But that principle cannot be extended as a
condition in every case.23

In a recent case24 however, alternate land was ordered to be provided. Large

piece of land was acquired for Mata Mansa Devi shrine Board and a writ was
filed challenging the same which failed but the court issued directive to the
government to provide alternate plots of similar sizes to small landowners who
apply for the same and establish that the land which was acquired belonged to
them.

22
Adusumilli Gopalkrishna v. Special Deputy Collector (Land Acquisition), AIR 1980 SC 1870
23
New Reviera Co-operative Housing Society v. Special L.A.O. (1996) 1 SCC 731
24
Hukum Chand Gupta V. State of Haryana 2005(1) SCC 572

Compensation-methods, principles and practice 7

1.4.3. Determination of compensation

In determining compensation the Courts have evolved some general principles

which are essential to understand. Thus for example, in fixation of
compensation under LAA there is always some element of guesswork but that
has to be based on some foundation. It must spring from:
• Totality of evidence,
• Pattern of rate,
• Pattern of escalation of price in the years preceding and
• Succeeding section 4 notification25.

1.4.4. Alternative employment and Minimum wages:

Alternative employment and minimum wages have also been recognized as a

reasonable method to be adopted in case of land acquisition. The most forceful
pronouncement of the Supreme Court made on this issue was the case of
displacement of the people arising out of submergence caused by construction
of the dam across the river Karjan. The Court held that “Simultaneously with
taking possession of the acquired land from any person in occupation of it,
such person shall be provided either alternative land of equal quality but not
exceeding three acres in area and if that is not possible, alternative
employment where he would be assured minimum wages…no possession of any
part of the acquired land shall be taken from any person unless and until he is
either provided with alternative land or alternative employment which is not
temporary in character so that he and the members of his family do not
remain without means of subsistence…if for any reason the State Government
is not able to provide alternative land or arrange for alternative employment,
the State Government will subject to the same exception, pay to the head of
the family at the latter’s place of residence, compensation equivalent to
minimum wage, every fortnight, during the period alternative land or
employment is not provided.”26

All the above general principles have arisen, as stated earlier, due to the two
most important sections in the Land Acquisition Act relating to compensation
viz. Section 23 and Section 24. Sections 23-25 lay down the principles upon
which compensation is to be awarded, the first two sections being applicable
to the enquiry before the Collector (Sec. 15) as well as to that before the
Court. Section 23 deals with the matters to be considered in determining
compensation and Section 24 includes matters that are to be neglected while
determining compensation. It is thus important to understand the ambit and
scope of these two provisions in detail, as they are central to the issue of
compensation.

25
LAO V. B Vijyender Reddy 2001 (10) SCC 669
26
Karjan Jalasay Yojana Assargrasth Shakhar Ane Snagharsh Samiti Vs. State of Gujarat AIR 1987
Supreme Court 532

Compensation-methods, principles and practice 8

1.5. Matters to be considered in determining compensation

There are six essential parameters [See Box 1] that are required to be
considered in determining compensation as per the Act. In addition to the
essential parameters an interest of 12% on market value from the date of
intention notification of Section 4 and a 30% solatium in addition to the market
value for the compulsory nature of acquisition has been added for determining
compensation.

Box 1: Parameters of Compensation

a) market value on date of intention notification under Section 4;
b) damage sustained by persons due to taking of standing crops or trees on land
acquired;
c) damage (if any) due to severing of acquired to be land from other lands;
d) damage (if any) where acquisition injuriously affects his other property
(movable or immovable) in any other manner or his earnings;
e) where person is compelled to change his residence or place of business then
reasonable expenses incidental to such change; and
f) damage (if any) which are bona fide resulting from diminution of profits on
land between declaration and taking possession.

1.5.1 Determination of Market Value:

The first parameter is the market value of the acquired land and is perhaps
most contentious and is often the substantial portion and part of
compensation. It is important to mention here that the Court is obliged to take
into consideration the matters referred to in Sec, 23 of the Act, while the
Collector in view of the provisions of Sec. 15 of the Act, has to take guidance
from Sec. 23 and 24 while determining the compensation27. It is well
established that market-value of property in such cases should be determined
not necessarily according to its present disposition, but laid out in the most
lucrative and advantageous way in which the owner could dispose of it28.

1.5.2. Burden of Proof: On Claimants? Not always

It is settled law that the burden of proof of market value prevailing as on date
of publication of Section 4(1) Notification is always on the claimants. Although
in some cases it has also been held that the burden of establishing market
value of the acquired lands is not always shifted to the claimants.29 Infact,

27
Clause 2nd of Sec. 23 (1) of the Act Dayaprakash Trikambhai v. Special Land Acquisition Officer,
Baroda, AIR 1969 Guj. 34 at p. 38.
28
Muhammad Ismail v. Secretary of State, AIR 1936 Lah. 599 at p. 601.
29
Special Land Acquisition Officer, Devangere v. Kotraiah, (1976) 2 Kar LJ 181

Compensation-methods, principles and practice 9

burden is also on the Land Acquisition Officer to establish the validity and the
adequacy of the compensation awarded by him.30

1.5.3. Principle of Prudent purchaser:

The Supreme Court has held that for determining just and adequate
compensation for lands acquired under Land Acquisition Act, “Court must not
indulge in feats of imagination but, sit in the armchair of a prudent purchaser
in open market and to put a question to itself whether as a prudent purchaser
it would offer same price in open market as is to be determined”31.

1.5.4. Reasonable market value: Guess Work Possible

While assessing the market value when there are no documentary evidences on
record along with the other evidence available, the Court has to do some guess
work to arrive at a reasonable market value. In a case where acquisition of
land was for widening of railway tracks, the Court relied on the well-settled
decision of Chiman Lal Hargovind Das v. Special Land Acquisition Officer32. It
said that the land situated on the frontage having special advantage and land
situation in the interior undeveloped area will not have the value at par since
the latter will have lower value than the land situated near developed area.
Some guess work is permissible in determining the value and on this basis the
Court did not interfere with the fixation of the market value by the High Court.

1.5.5. Future Potential Value of Land: Distinguishing Potentiality and

Realizable Potentiality
In another case where future potential value of land in case of acquisition for
construction of over bridge was considered. In determining the market value
prevailing on the date of notification, the Court distinguished potentiality of
the land possessed and realizable potentiality. Infact, this issue was well
settled by the Privy Council33 where it has been that the Court, in determining
the market value under Section 23 of the LAA stated ‘it is the possibility of the
market value of the land and not realized possibility that must be taken into
consideration. The very concept of potential value would mean existing in
possibility but not enact’. It is also a settled view that the land is not to be
valued merely by reference to the use to which it is being put at the time at
which its value has to be determined, but also by reference to the uses to
which it is reasonably capable of being put in future34.

1.5.6. Factors in determining Market Value:

The court has laid down factors while determining market value of the land35.

30
Land Acquisition Officer, Devangere v. Nagappa (1973) 2 Mys LJ 380
31
[Hookiyar Singh v. Special Land Acquisition Officer, 1996(5) Supreme 97 AIR 1996 SC 3207]
32
AIR 1988 SC 1652
33
V.N. Gajapati Raju v. Revenue Division Officer, Vishakapattanam [AIR 1939 PC 98]
34
Tribeni Devi Sarawgi v. Collector, Ranchi, 1981 (29) B.L.J.R. 27 at pp. 31, 32
35
Chimanlal Hargovinddas v. Special Land Acquisition Officer, Poona and another AIR 1988 SC 1652

Compensation-methods, principles and practice 10

a) One of the first principles that the Court has to adopt is that the court has
to treat the reference as an original proceeding before it and determine the
market value afresh on the basis of the material produced before it.
b) The determination has to be made standing on the date line of valuation
(i.e. date of publication under Section 4) as if the value is a hypothetical
purchaser willing to purchase land from the open market and is prepared to
pay a reasonable price as on that day. It has also to be assumed that the
vendor is willing to sell the land at a reasonable price.
c) In doing so by the instances method, the court has to correlate the market
value reflected in the most comparable instance, which provides the index
of market value.
d) Only genuine instances have to be taken into account. (Sometimes instances
are rigged up in anticipation of acquisition of land)
e) Even post-notification instances can be taken into account (1) if they are
very proximate, (2) genuine and (3) the acquisition itself has not motivated
the purchaser to pay a higher price on account of the resultant
improvement in development prospects.
f) The most comparable instances out of the genuine instances have to be
identified on the following considerations: (i) proximity from time angle (ii)
proximity from situation angle
g) Having identified the instances, which provide the index of market value
the price reflected therein, may be taken as the norm and the market value
of the land under acquisition may be deduced by making suitable
adjustments for the plus and minus factors vis-à-vis land under acquisition
by placing the two in juxtaposition.
h) A balance sheet of plus and minus factors may be drawn for this purpose
and the relevant factors may be evaluated in terms of price variation as a
prudent purchaser would do.
i) The market value of the land under acquisition has thereafter to be
deduced by loading the price reflected in the instance taken as norm for
plus factors and unloading it for minus factors.
j) The exercise indicated above has to be undertaken in a common sense
manner, as a prudent man of the world of business would do. We may
illustrate some such illustrative (non exhaustive) factors: -
S No. Plus Factors Minus factors
1. Smallness of size Largeness of area
2. Proximity to a road Situation in the interior at a distance from
the road
3. Frontage on a road Narrow strip of land with very small
frontage compared to depth
4. Nearness to developed Lower level requiring the depressed portion
area to be filled up
5. Regular shape Remoteness from developed locality
6. Level vis-a –vis land under Some special disadvantageous factor which
acquisition would deter a purchaser

Compensation-methods, principles and practice 11

1.5.7. Evaluation of factors:

The evaluation of these factors of course depends on the facts of each case.
There cannot be any hard and fast or rigid rule. Common sense is the best and
most reliable guide. For instance, take the factor regarding the size. A building
plot of land say 500 to 1000 sq yards cannot be compared with a large tract or
block of land will have to be developed by preparing a lay out, carving out
roads, leaving open space, plotting out smaller plots, waiting for purchasers
(meanwhile the invested money will be blocked up) and the hazards of an
entrepreneur. The factor can be discounted by making a deduction by way of
an allowance at an appropriate rate ranging approx, between 20% to 50% to
account for land required to be set apart for carving out lands and plotting out
small plots. The discounting will to some extent also depend on whether it is a
rural area or urban area, whether building activity is picking up, and whether
waiting period during which the capital of the entrepreneur would be locked
up, will be longer or shorter and the attendant hazards.

1.5.8. Well-recognized principles of valuation of Market Value:

Apart from the observations made above, the Courts have endorsed some well
recognized principles to determine the market value of land. A Court ruling
emphasized this point by stating that it is the duty of the Land Acquisition
Officer to hold a careful enquiry and determine the market value in accordance
with the principles laid down in Section 2336 and on the basis of the well
recognized principles of valuation37. It is well settled law that the amount
awarded by the Land Acquisition Collector forms an offer and that it is for the
claimants to adduce relevant and material evidence to establish that the
acquired lands are capable of fetching higher market value and the amount
offered by the Land Acquisition Collector was inadequate.38

a) Comparative Sales Method

Comparative sales method is perhaps one of the most well recognized and
accepted methods in Courts. Under this method the Land Acquisition Officer
(LAO) has to enquire about transaction of sale of similar lands. The market
value of the land is to be assessed on basis sale price of other comparable lands
in the adjoining area.39 To elaborate this point further, in a case when there
was evidence that the land had potentialities for development as a building
site since construction of various nature existed in the neighborhood. Thus the
land was required to be evaluated as urban property and not as agricultural

36
Special Land Acquisition Officer Vijainagar Steel Plant, Bellary v. Sanna Subanna and others, (1976) 2
Kar LJ 345.
37 [State by the Assistant Commissioner and Land Acquisition Officer v. T.R. Meetya Naika, (1974) 2 Kant LJ

388.
38
Periyar and Pareekanni Rubbers Ltd. V. State of Kerala, AIR 1990 SC 2192
39
O.K. Muthuswamy Mudaliar v. State of Madras, (1968) 2 SCWR 264.

Compensation-methods, principles and practice 12

land.40 Recently it has been held41 by the Court that in comparable instances
of land for the determination of the market value there should be proximity
from time and situation angle. No mathematical accuracy is required. Further,
Purpose of acquisition, relevancy of purpose for which the acquisition is made
is also a relevant factor for determining the market value and must be taken in
to consideration.

b) Other Methods of valuation of Market value:

There are several other methods of arriving at market value. One such standard
method includes:
i) Opinion of expert
ii) The price paid within a reasonable time in a bonafide transaction of
purchase of land acquired or lands adjacent to land acquired possessing similar
advantages.
iii) Capitalization method or its potential value being close to the developed or
developing colonies, nearness to the road etc42.

c) Methods of capitalization of the net income as an alternative method:

Capitalization method mentioned in the preceding paragraph needs to be

understood in a greater detail. It is also now settled practice that if evidence
of comparative sales is not available; then alternative methods of valuation is
followed which include the method of capitalization of the net income. Under
this method it is determined as to what is average gross yield from agricultural
lands; what is the cost of cultivation and what is the average price of the
agricultural commodity grown on the lands, all such matters which require
investigation should be incorporated into the determination of the market
value43. In other words, in case of no comparable land sale deeds, the most
accepted and recognized method to find out the value of the land prevailing on
the date of notification u/s 4, is to find out the annual income of land which
the owner is deriving or expected to derive from the use of the land and
capitalize the same by adopting a multiplier44.

d) Willing Purchaser and Willing Buyer:

Another well known test is the test of willing purchaser and willing buyer. In
awarding compensation in acquisition proceedings, the Court has necessarily to
determine the market value of the land as on the date of the relevant
notification. It is useful to consider the value paid for similar land at that time

40
Bhagat Ram v. State of Punjab, AIR 1981 P&H 163
41
Viluben Jhalejar Contractor V. State of Gujarat 2005 AIR (SC) 2214
42
R.P.Singh V. UOI 200597) SCC 24
43
Special Land Acquisition Officer, Devangeree v. Kotraiah, AIR 1977 Kant 33: (1976) 2 Kant LJ 318
44
Executive Director V. Sarat Chandra Bisoi 2000 AIR (SC) 2619

Compensation-methods, principles and practice 13

under genuine transactions. The market value envisages the price, which a
willing purchaser may pay under bonafide transfer to a willing seller.

e) Principle of Deduction

In fixing the market value of a large property on the basis of a sale transaction
for smaller property, generally a deduction is made taking into consideration
the expenses required for development of the larger tract to make smaller
plots within the area in order to compare it with the smaller plots dealt with
under the sale transaction. The principle of deduction in the land value
covered by the comparable sale is thus adopted in order to arrive at the
market value of the acquired land.45 Further, It is also true that where no
evidence of sale of large pieces of land or area comparable with the acquired
land is available, the sale – transactions of smaller pieces of land can be taken
into consideration and a reasonable cut can be imposed in the market price as
represented by them so as to arrive at the correct market value of the acquired
land. In a recent case46 it has been held that there is no bar in law to have
small plot sale deed as exemplar for acquiring large portions of land especially
when there is no other relevant or material evidence available. However such
exemplars can be used after making adequate discount.

1.5.9. Determination of compensation, past transaction not the only criterion

It could hardly be the only reason for determining the compensation amount.
There are other factors which have to be taken into consideration, e.g. the
land is not to be valued merely by reference to the use to which it is being put
at the time at which its value has to be determined, but also by reference to
the uses to which it is reasonably capable of being put in the future; and
market value is the potential value of the property at the time of acquisition
which would be paid by a willing buyer to a willing seller, when both are
actuated by business principles prevalent in the locality at that time. The
Court, therefore, emphasized that while determining the value of the land
acquired by the Government and the price which a willing purchaser would give
to the willing seller, only the ‘past sales’ should not be taken into account but
the value of the land with all its potentialities may also be determined by
examining (if necessary as a Court witness) local property dealers or other
persons who are likely to know the price that the property in question is likely
to fetch in the open market.

1.5.10. Interest on solatium

In determining market value an additional factor is the solatium. In fact court
decisions have also mandated that appellant is entitled to get interest on

45
Bhagwathula Sumanna v. Special Tahsilder and Land Acquisition Officer, Visakhapatnam Municipality,
(1992) 1 Civ LJ 214 (SC).
46
Rishi Pal Singh V. Meerut Development authority 2006 (3) SCC 205

Compensation-methods, principles and practice 14

solatium and amount awarded under section 23 (1A) of the LAA Act47. The
legitimacy of this additionality was derived from an earlier case where the
issue of interest on solatium was settled. In view of Sunder V. Union of India48
It was held that the expression “awarded amount” would mean amount of
compensation worked out in accordance with the provisions contained in
section 23, including all subsections thereof. State is liable to pay interest on
amount envisaged under section 23(2) of the Act. Interest awarded u/s28 would
include within its ambit both the market value and statutory solatium.
Expression awarded amount in section 34 would mean the amount of
compensation worked out in accordance with the provisions contained in
section 23 including all the subsections thereof. It has been held that the
amount of award under section 34 means the aggregate amount of
compensation calculated in accordance with the provisions of the sub-sections
of section 23, which includes solatium49. In another case50 it was held that if
the award of the decree doesn’t specifically refer to the question of interest on
the solatium or where the claim for interest has not been made and rejected
then it would be open to the execution court to apply the ratio of Sunder’s
case and compensation awarded would include solatium.

1.5.11. The Practice of “Safe Market Value”:

It was also found out during the state visits and interviews that there are
variances both on perception and practice on what is the substantive law and
the manner in which the process of land acquisition is carried out. Thus for
example it was observed that often the process of arriving at market value in
compensation cases, the state authorities often do not consider the real
market value. This is primarily to avoid the allegation of being branded as
colluder with the person affected by the superior authorities. It is thus a safe
practice to undervalue the land so that the Courts can arrive at just
compensation through careful perusal of records that is submitted before
them. Hence the burden of computing the market value is shifted to a judicial
process rather than an executive one.

1.6 Matters to be neglected in determining compensation

There are at least eight parameters that need to be disregarded by the court in
determining compensation under Section 24 of the LAA. These are:

Matters Disregarded in Compensation:

1. Degree of urgency that led to acquisition.
2. Any disinclination of the person to part with his land

47
Karimbanakkal Sulaiman V. Special Tehsildar for KAKPIP 2004(13) SCC 642
48
2001(7) SCC 211
49 Chairman Neyveli Lignite Corporation Ltd. V. C Govinda Padayachi 2006(9) SCC 725
50
Gurpreet Singh V. UOI 2006(8) SCC 457

Compensation-methods, principles and practice 15

 3. Any damage caused by a private person would not render such person
liable to a suit.
4. Any damage caused to the land acquired after declaration notification,
which may be required for consequent use.
5. Increase in value of land acquired due to the use to which it may be put.
6. Increase in value of other land of the person due to the use to which
acquired land may be put.
7. Improvements or outlays or disposal of the land acquired without the
sanction of the Collector after the intention notification.
8. Increase in value of land by putting to any use, which is forbidden by law
or opposed to public policy.

Compensation-methods, principles and practice 16

Chapter II- Current Approaches, Methods and Role of Court in Himachal
Pradesh on Compensation

2.1. What actually happens is a matter of enquiry:

In the context of Himachal Pradesh it is important to understand as to how

the Collector compiles the data of all the interested persons, enquires the
veracity of a claim of any person as being interested to claim compensation
and what kind of documentary evidence is required by him/her to
substantiate the claim so made. Who are the persons who are finally
considered entitled to the compensation and how is the amount of
compensation apportioned among them.

2.2. Land Administrative Manual and Standing Orders 28: The Guide Books
to be adhered
The state of Himachal Pradesh has adopted the Punjab Land Administration
Manual (hereinafter PLAM). The land administration manual is a compendium
of rules and regulations regarding the detailed procedures to be followed by
the revenue officers in the discharge of their functions and duties. It is
absolutely essential for them to follow the procedures contained in the
manual. The manual covers all aspects of land administration in detail and
adherence to the same ensures uniformity of procedure and process across
the entire spectrum of land administration. It is a reference point in the field
of land administration. There is a chapter51 on acquisition of land for public
purpose in PLAM. This chapter deals with the following aspects of the land
acquisition for public purpose among other things.

2.2.1. Preliminary Estimate of Cost52

The departmental officer shall ask the Collector for the data to be supplied to
him in regard to the price of land, building or trees etc for him to be able to
make an estimate of the value of the land to be acquired. If any damage is
done to the land or to the crops in the process he must offer compensation
and if the same is not acceptable to the landowner the matter must be
referred to the DC whose decision in this regard shall be final. After the plan
is made, data from the DC office is sought, to make a preliminary estimate of
the cost of acquiring the land. The estimate shall have ordinary rate per acre
which land of the same description is fetching in the neighbourhood and a
rough valuation of trees and buildings. This should also have a note on any
valuable trees or buildings or other property for which compensation will have
to pay in addition to the value of the land.

51
Chapter XIV of Punjab Land Administration Manual (PLAM)
52
Para 465 ibid

Compensation-methods, principles and practice 17

2.2.2. Market value of land53

In order to decide the amount of compensation due the Collector first has to
settle the market value of the land and then fifteen per cent is added on top of
that value. The Collector shall pay special attention to the matters and
directions given in the LAA in this regard54. To determine the market value of the
land on the date of the publication of the intention notification, the chief
factors, which the Collector shall keep in mind, would be the prices paid for
similar lands recently acquired under the LAA, prices paid in private transactions
which are recorded in registered deed or judicial proceedings etc. It shall be
open to the Collector to consult respectable people who are disinterested in such
acquisition to be able to arrive at a just and fair market value. His main data
however shall be the preliminary estimate made as mentioned above. Though he
is not bound by the preliminary estimate but any significant departure from that
estimate if any should be explained in writing by the Collector in his award55.
However this 15% is added only on the market value of the land and not on the
total award. Land as per the LAA includes lands, trees and building and not on
any other component of the award.56 If the Collector finds the amount of
compensation so arrived at to be much in excess of the preliminary estimate
referred to in para 465 above then he should refrain from making an award and
ask for further instructions.
57
2.2.3. Consequential damages

The Collector also has to keep in mind whether the persons interested in land
have any claim for consequential damage which can fall chiefly under two
categories namely loss of standing crops or trees and damage to other land of
the right holder by taking up of the land required. In case the person interested
demands his harvest then the value for the same should be deducted from the
amount of compensation granted in lieu of such crops.

2.2.4. Damage to other land of right holder58: Special Instructions from

Railways and Irrigation

This is considered a difficult head for the Collector to deal with. It is very
desirable to avoid claims for consequential damages, where possible, because it
is difficult to calculate the compensation under this head which is fairly due. If
unreasonable claims are made under the head of severance, government may
direct the Collector to acquire the whole of the objector’s land59. There are

53
Para 476 PLAM
54
Para 50 ibid
55
Para 50
56
See para 54 of SO28 of LAA
57
Para 477 PLAM
58
See para 478 PLAM and para 51 of SO28 of LAA
59
Section 49(2) of LAA

Compensation-methods, principles and practice 18

clear instructions in various departments such as Railways to ensure that fullest
consideration is given to the convenience of the landowners even if it means
slight alteration in alignment if feasible to avoid the consequential damages.60
Even in the Irrigation Department strict orders exist forbidding the excavation of
canal water courses through land belonging to a well until a suitable pipe,
culvert or siphon is completed and the cultivator’s water-course is connected at
both ends with the same at the government cost.61

2.3. Matters to be excluded from consideration in estimating market

value62

In estimating the market value, only the condition of the land at the time of
intention notification has to be taken into consideration. As stated earlier, LAA
specifically mentions the matters, which should be excluded from consideration
while determining the market value of the land.63 The urgency of the
requirement of land by the government or the reluctance of the owner of the
land to part with it has no bearing whatsoever on the market value of the land.
64
2.4. Compensation other than in money : Land for Land-Conditions

Usually persons who are being deprived of their land for public purpose would
prefer to take other land in exchange rather than money compensation. Land in
lieu of land can be granted as compensation when the person interested asks the
government for it or if the government has land available with it which can be
given as compensation65. With the sanction of the local government an
arrangement to give alternate land can be done. The Collector, however, at the
first instance has to evaluate the compensation in terms of money and moreover
no one can be compelled to take land instead of money66.

Another form in which compensation can be granted is the reduction or remission

of the land revenue payable on the remainder of the right holder’s land but this
also needs prior approval of the state government67. However since this
remission/reduction in land revenue introduces complications in the revenue
accounts it is not desirable to adopt this mode of compensation payment.

60
GOI circular No. IV Railway dt 4th September 1897 mentioned in para 478 of SO 28 of LAA
61
Irrigation department circular no. 46-I dated 6th January, 1904 mentioned in para 478 of SO 28 of LAA
62
See para 479 PLAM
63
Section 24 LAA
64
See para 481 PLAM
65
See para 57,58,59 and 60 of SO 28 of LAA
66
See para 58-60 of So 28 of LAA
67
Section 31(3) of LAA

Compensation-methods, principles and practice 19

2.5. Apportionment of compensation68

If the right holders agree between themselves regarding their respective shares
in the compensation then their agreement should be incorporated in the award69.
However where the right holders are of different classes e.g. superior owners,
inferior owners or occupancy tenants then the Collector usually have to divide
the compensation between them. The share of the occupancy tenant would
properly be measured by the proportion between the price at which he could sell
his tenant right and that at which the landowner could sell the land, if
unencumbered by the subordinate title. Another way to arrive at the share of
the occupant tenant would be to look at the way the profits arising out of the
land are divided. Different classes of occupancy tenants are also required to be
treated differently70.

2.6. Compensation to assignees71:

The loss of income or reduction of income derived from an assignment or the loss
of position of assignee is very unpalatable and should be first evaluated and then
adjusted against the remaining estate if there is any left. In other cases the
government through the financial Commissioner/Deputy Commissioner can also
make a proposal for the grant of a pension or of a new assignment. Such
proposals should not be routinely made as they should only be made in favour of
a deserving assignee who keenly feels the loss of the same. In case where the
cash compensation72 is awarded and the assignment is for more than one life or
in perpetuity, the compensation is to be calculated at twenty years purchase of
the government revenue assessable on the land. If the assignment is for life the
value is to be calculated excluding months and days according to the scale laid
down by the government for buying out pensions according to which a fixed
graduated value is given with reference to ages. Where nazrana is paid annually
by the jagirdar, this is really a deduction from the revenue of the jagir and in
such a case proportionate amount of nazrana should be remitted and the amount
of the compensation should be calculated after deducting the nazrana
proportionate to the amount of assignment extinguished. If the said assignment
is for the term of the settlement, the compensation must be calculated with
reference to the number of years the settlement has to run however in no case
the limit of the perpetual grant be more than twenty years.

2.7. Compensation for damage done during occupation 73

The Collector has to pay compensation for any damage to the land owners if such
damage is done during the course of their occupation of this land and which is
68
Para 482 PLAM
69
Section 29 LAA
70
See para 482 of PLAM for details.
71
Para 489 PLAM
72
See para 53 SO 28 of LAA
73
Para 491 PLAM

Compensation-methods, principles and practice 20

not covered by the agreement. In cases where the land has become unfit for the
purpose to which it was put immediately before the occupation of the
government by the landowner, they can ask the government to buy it from
them74. Any dispute regarding the condition of the land between the government
and the landowners should be referred to the district judge75.

2.8. Compensation and State of Himachal Pradesh: Some specific sectoral

concerns

Apart from the statutory and administrative instructions on compensation,

which has been explained above the courts too, have ruled on specific sectors
and issues in Himachal Pradesh which should be understood in the context of
compensation.

2.8.1. Acquisition of land with fruit trees: Both are essential in determining
compensation

The state of Himachal also presents some unique situations regarding

compensation. As is well known horticulture remains an important source of
income in Himachal Pradesh, it was held that in the case of acquisition of land
with the fruit bearing trees, the land owners are entitled to compensation for
the land as well as trees which is to be assessed separately in view of the
standing order 28 issued by the Financial Commissioner, H.P76 as well as the
ratio of the Division Bench in the case of Collector LAC Mandi vs. Karam Singh
and Others77 and Harbans Singh’s formulae78

2.8.2. Road Sector: acquisition of land of different classification: Conflicting

Views

In another road related case79 in Himachal Pradesh, land of different

classification was proposed to be acquired for the construction of National
Highways-21 by the Public Works Department where the LAC assessed the
market value of the land on the basis of different classification i.e. Barani, Gair
Mumkin, Banjar Kadim etc. The landowners filed for enhancement before the
District Judge who enhanced the compensation maintaining the assessment on
the basis of the classification of the land. The landowners further filed appeals
against the judgment of the District Court. The court held that one of the
landowners was entitled for payment of compensation on account of loss of
goodwill and loss of earning/ carriage. The conclusion arrived by the District
Judge pertained to grant of uniform compensation irrespective of classification
74
Section 36 ibid
75
Section 37 ibid
76
Ramesh Chand and Others Vs. Land Acquisition Collector 2004(1) S.L.J 453
77
Latest HLJ 2000 (HP) 694
78
The Valuation of Fruit trees, Basic Principle and Methods
79
Smt. Gulabi vs. State of HP 1997 (2) SLJ 1338

Compensation-methods, principles and practice 21

and nature of the acquired land ignoring the purpose to which it was being put
prior to the acquisition, as well as to the one it is likely to be put after the
acquisition however, the Supreme Court in its latest judgment has averred that
purpose for acquisition is a relevant factor to be taken into consideration for
fixing compensation80. An important to be considered here in the state context
in relation to the Supreme Court is that there are numerous views expressed at
the High Court level which has been modified or over ruled by the Supreme
Court and this needs a constant vigil especially in a state context on sensitive
issues such as compensation.

In another recent case81 on acquisition for roads, the High Court has affirmed
the decision of the District Court where the Collector assessed the land at a
flat rate irrespective of land classification and the District Court assessed the
market value of the acquired land on the basis of the classification of the land
and enhanced the market value. Further, the High Court upheld the method
adopted by the lower court in arriving at the market value by taking
consideration sale instance of a smaller piece of land to assess market value of
a large tract of land.

2.8.3. Road Sector: Additional compensation from date of notification or date

of possession: Conflicting views

In another case82 where possession of the land was taken before the issuance of
notification under section 4 of the LA Act for construction of National Highway-
21 in Kullu Himachal Pradesh, it was held that while fixing the market value of
the acquired land sale price of small parcel of land can be the basis for arriving
at the market value of the acquired land after effecting deduction towards
development charges. But more importantly a potential contentious issue was
also addressed where the High Court decided on the question of benefits being
paid under section 23(1-A) and it was held that the possession been taken
before the publication of intention notification, benefits under section 23(1-A)
are payable from the date of possession till the date of award of the Collector,
LA. This, however, is contrary to the ratio of the Supreme Court where it has
held that the benefits are payable only from the date of issuance of intention
notification83.

80
Nelson Fernandes vs. Spl. Land Acquisition Officer 2007 (4) SCALE 52)
81
See also for the latest position, The Collector, Land Acquisition and another v. Nagesh Kumar and
another 2005 (1) S.L.J. 328
82
LAC, H.P.PWD, Kullu vs. Smt. Dugli Devi and others 1997(2) SLJ 1776
83
Pradip Chandra Parija and others v. Pramod Chandra Patnaik and others (2002) 1 SCC 142 and R.L Jain
(D) by Lrs. V. DDA and others 2004 (2) SLJ 956)

Compensation-methods, principles and practice 22

2.9. Grazing Rights and entitlement to Compensation

In another significant case in Himachal84, the appellants had been granted a

decree whereby grazing rights had been reserved in their favour in Shamlat Deh
of the village. The land was acquired and the compensation under LAA was paid
to the proprietors of the land excluding the appellants. The question arose
whether the non-proprietors who have been given grazing rights in the Shamlat
Deh are entitled to share in the compensation for the land which has been
acquired under LAA. After examining the provisions of the Punjab Village
Common Lands (regulation) Act, 1961, Indian Easements Act and LAA it was
held that the persons having grazing rights in the Shamlat Deh were persons
interested and were entitled to compensation and the courts below ought to
have apportioned 1/4th of the compensation in favour of the appellants.

2.10. Development Cost and Development Charges:

Ordinarily the quantum of developmental cost is one third but it can be less
also depending upon the circumstances of the case85. It has been held that in
acquisition of large piece of land a deduction of 33.33% must be made towards
development cost86. In fact deduction of development charges ought to be
adequately provided for but it varies from place to place and area to area and
amount of developments, which are required to be carried out. There cannot
be any fixed amount of deduction towards development charges87.

84
Dayalo and others v. Smt. Dhano and others 2005 (2) SLJ 923(Punjab and Haryana High Court
85
Land Acquisition officer and Revenue Division Officer V Ramanjulu 2005 (9) SCC 594
86
Himachal Pradesh Housing Board V Bharat S. Negi 2004 AIR (SC) 1800
87
Simla Development Authority and others V Santosh Sharma and others AIR 1997 SC 1791 referred in
Tejumal Bhojwani V State of UP 2003 (supp-2) JT 194

Compensation-methods, principles and practice 23

Chapter III- Allied Laws related to Land Acquisition and compensation in
Himachal Pradesh

Apart from the compensation methods, principles, process as well as court

decisions described above it is equally and often ignored other land related
laws where the issue of compensation is discussed but not well known. These
also include some unique methods of arriving at compensation value or the
manner in which compensation is dealt with which should be understood in a
sectoral context.

3.1. Himachal Pradesh Roadside Land Control Act:

Although there is no acquisition under this Act but in declaring the scheduled
road or controlled areas under the Act if any interest of the concerned person
gets prejudicially affected because of such order, then it could be the basis of
compensation. As a matter of process, the compensation88 claimed under this
Act can either be disposed off by the Financial Commissioner by deciding to
acquire the said land as per the provisions of LAA or refer the matter for
disposal to an officer who is exercising the powers of Collector under LAA. If
the Financial Commissioner decides to acquire the land then the claimant shall
have to be paid the expenses for preparing the case to be initiated before the
Collector if s/he refers the same to the Collector for acquisition to be carried
out. In case no such expense is paid then the acquiring authority shall take that
also in to account while determining the amount of compensation to be paid in
lieu of land to be acquired under LAA. There is no provision in this Act, which
prevents the parties concerned, in case the matter has been referred to the
Collector for the acquisition of land under LAA, to have a mutual agreement as
to the price of the land or the amount of compensation payable.

3.2. Procedure to determine the amount of compensation89

When a claim is transferred to an officer who is to exercise the powers of a

Collector under the LAA he/she shall determine the amount of compensation
payable to the person. The amount of compensation so determined shall in no
case exceed the difference between the market value of the land before the
notification of the area as controlled area and the diminished market value
after the exercise of any right thereon has been restricted, regulated or
controlled after such notification. In order for the claimant to be able to get
compensation he/she shall have to prove to the satisfaction of the officer
concerned that the proposal of development of land for which an application
had to be made to the Collector in view of the concerned area having been
declared as controlled area is immediately practicable or would have been so if
no restriction, regulation or prohibition had been imposed upon the land

88
See section 8
89
Section 9

Compensation-methods, principles and practice 24

 concerned under this Act. No compensation shall be payable if the controlled
land was under similar or substantially similar restrictions under the provisions
of some other Act for the time being in force at the time of being made subject
to them under the provisions of this Act. The compensation shall not be paid in
case compensation in regard to the restrictions has already been made though
the restrictions in question happen to be imposed under some other Act but are
quite similar to the ones imposed under this Act. All the relevant provisions of
the LAA shall be applicable to the award, which shall be made while exercising
authority under the provisions of this Act. Nothing in this Act shall affect the
right of the government to have a negotiated settlement of claim, which
becomes due because of the operation of this Act by mutual agreement.

3.3. Tenancy and Land Reforms Act: Procedure for acquisition and
computation of compensation90

I. If any agriculturist is interested to sell his land to the state government he

shall make an application in the prescribed form to the Collector
mentioning therein the price at which he/she is willing to sell. The
Collector shall make an enquiry to ascertain the value of the land and
shall forward the case to the state government for its consideration.
II. The state government within six months shall communicate its decision to
the Collector or directly to the persons concerned and it shall normally
base its decision on the report of the Collector.
III. The Collector shall make the payment of reasonable price as determined
by him incase the government decided to buy or communicate the refusal
of the government in case it decided not to buy. The reasonable price of
the land91, any building made on it, any well, embankment constructed,
permanent fixtures and trees planted are determined within a period of
three months of the date of the receipt of notice by him by the
government communicating its decision to buy such land and shall be
based on the following factors.
a. The rental value of the land used for similar purpose in the
locality
b. The structures, wells, embankments constructed or
permanent fixtures affixed to and trees planted on the land.
c. The profits from agriculture in respect of similar land in the
locality
d. The price of crops and commodities current in the locality
e. The improvement made in or on land
f. The land revenue other sums or cess payable in respect of this
land
g. Such other factor as may be prescribed

90
Section 119
91
Section 120

Compensation-methods, principles and practice 25

IV. On the payment of money the land shall vest absolutely in the state
government without any encumbrance whatsoever. The reasonable price
as determined above when confirmed by the state government becomes
final.
V. The rights of the tenants are not affected by such transfer of land to the
state government

3.4. Himachal Pradesh Ancient and Historical Monuments and

Archaeological Sites and Remains Act, 1976: Compensation under the Act

The Act details the principles of compensation to be followed while

determining market value of property or the compensation to be paid. In case
of a dispute with regard to market value or compensation it will be decided as
per provisions of sections 3, 5, 8, to 34, 45 to 47, 51, and 52 of Land
Acquisition Act.92 At the time of making an enquiry under the LAA the
Collector for the determination of market value will be assisted by two
assessors one of whom shall be nominated by the state government and the
other to be nominated by the owner and in case the owner has not nominated
an assessor then the Collector will nominate the assessor.93

3.5. The Himachal Pradesh Slum Areas (Improvement and Clearance) Act,
1979: Determination of Compensation under the Act
The Slum Act enumerates the formula for calculation of the amount payable for
the acquired land. The amount to be paid shall be an amount equal to sixty
times the net average monthly income94 derived from the land for five
consecutive years and the net average income is determined on the basis of
principles set out in the schedule to the Act.

3.6. Dispute Resolution on compensation, apportionment

After the amount is determined a notice is issued to the owner or any person
interested to accept the amount being disbursed. If the person refuses to
accept the amount as determined then an appeal is preferred to the state
government.95 The state government after hearing makes an order that is final
and cannot be challenged in any court of law. The competent authority under
the Act is empowered to apportion the amount to the different persons. If case
of a dispute the matter is referred to the state government for its decision.
While deciding on merits provisions of part III of the Land Acquisition Act are to
be followed.96 The determination of amount payable for acquisition and its
apportionment being decided the payment is made to the persons. In an event
92
Section 28
93
Section 28
94
Section 16
95
Section 16(4) (5) (6)
96
Section 17

Compensation-methods, principles and practice 26

of a dispute on the title of the person entitled to receive the amount or on its
apportionment, the amount is deposited by the competent authority in the
court of the District Judge and it has to be dealt in the manner prescribed
under sections 32, 33 of the LAA, 1894.

Concluding Remarks:

Compensation mechanisms are quite complex as it is now quite clear. One of

the key reasons for this complexity is the fact that it has been dealt with in
parts. The need is to understand the issue for compensation from a holistic
perspective. First there is a need to understand the exact statutory frame.
Basic conceptual clarity on who is a person interested, how payment for
damages is different from compensation is a pre-requisite. The exact
understanding of how awards are made and the factors that are taken into
account in determining compensation is crucial. Compensation and market
value are often interchangeably used which may not be a correct approach.
Arriving at a market value of the proposed acquisition is a substantial part of
the compensation but not a whole by itself. There are certain factors that need
to be considered while determining compensation and there are certain factors
that need to be disregarded while determining compensation.

Clearly there are methods of computing market value. No precise mechanism

exists but it is a combination of administrative methods within the statutory
frame as well as court interpretations Court rulings have proved to be
guidelines in not only determining market value but also set the broader
parameters of compensation. Any new strategy must integrate the
administrative orders as well as use the context specific court decisions. The
state procedures are again unique due to the combination of the Punjab Land
Administration Manual as well as Standing Orders 28 under the LAA. The courts
too have dealt with unique situation of fruit trees, grazing land as well roads in
Himachal Pradesh differently and uniquely. The other lands related laws such
as land control and land reforms also deals with compensation in a unique
manner and must be considered uniquely while computing compensation.

Compensation-methods, principles and practice 27